April 15 (Bloomberg) -- Brazilian mining companies
including world No. 1 iron-ore producer Vale SA probably will
avoid a new type of windfall tax as the government focuses on
lifting royalty fees, the mines and energy minister said.

President Dilma Rousseff’s government is completing new
mining industry rules and expects to publish them in as early as
in 15 days, Edison Lobao said during an April 12 interview in
Brasilia. While a decision hasn’t yet been made on a new so-called special participation tax, a levy on sales or profit
generated by the country’s most productive operations, the
government is leaning against such a measure, he said.

“We are re-examining the special participation tax and we
may not include it in the new framework because of domestic and
international reasons,” Lobao said, speaking at his office in
Brazil’s capital. “We are increasing royalties quite a bit,
practically doubling them. We are leaning toward not having a
special participation.”

Brazil, the world’s second-largest iron-ore exporter, has
been discussing since at least 2008 mining revisions that
include higher royalties. The country charges special
participation taxes of as much as 40 percent on oil projects.
The possibility of such a levy for the mining industry has been
hanging over Vale in the past few months, according to Bank of
America Corp. Shares rallied April 12 after Lobao’s comments.

Brazil, which allows mining companies to subtract some
royalty calculation costs, will start charging the levy on
companies’ gross revenue, Lobao said. The royalty fee will
double to 4 percent from 2 percent, he said. Vale’s press office
in Rio declined to comment on Lobao’s comments.

’Very Positive’

A special participation tax of 5 percent on Vale’s earnings
before items would have a $7.5 billion impact in net present
value, Bank of America analysts led by Felipe Hirai wrote in a
note to clients dated April 14.

“No special participation tax would be very positive for
Vale,” the Sao Paulo-based analysts wrote, reiterating a buy
recommendation. “The market has become increasingly concerned
on the possibility of an SPT, but we still think the risk of a
high SPT is low.”

The government expects to re-open mining concessions in “a
few days” to remove a freeze imposed while the rule revisions
were reviewed, Lobao said.

Mining operations are different than oil and establishing a
special participation tax “doesn’t make sense,” Vale’s Chief
Executive Officer Murilo Ferreira said Feb. 28 in an analysts’
conference call.

Nation’s Respect

Lobao said Batista deserves the nation’s respect even as
investors dump shares in his interlinked natural resources and
logistics companies.

The minister said it’s feasible for state-run Petroleo
Brasileiro SA to use the port Batista’s LLX Logistica SA is
building in Rio de Janeiro state. He declined to comment on
whether the billionaire will get direct government assistance
for his companies that have lost as much as 90 percent in the
past 12 months after missing production targets and piling on
debt.

‘Big Brazilian’

“We can’t forget that until a little while ago he was
considered the sixth-most successful businessman in the world,”
Lobao said. “As such, he’s important for Brazil’s economic
landscape.”

Batista, 56, became Brazil’s richest man by selling shares
in oil, mining, electricity, shipbuilding and port companies at
a time a commodities boom was accelerating growth in Latin
America’s largest economy.

This year, he dropped off the world’s top 100 richest
people list after output at his first oil field was a fraction
of original estimates. His estimated wealth slumped to $7.3
billion April 12 from as much as $34.5 billion in March 2012,
according to the Bloomberg Billionaire Index.

OGX Petroleo e Gas Participacoes SA, the oil company
Batista controls, rents equipment from his shipbuilding unit and
plans to use the LLX port to support its offshore operations,
throwing the viability of his group of companies into doubt.